LUKoil and Yukos interested in European markets

Feb 19, 2002 01:00 AM

Russia's two largest oil companies -- LUKoil and Yukos -- are contesting to extend their downstream reach into the newly liberalised markets of central and southern Europe. Both companies said separately, that these were natural areas for expansion because of low transport costs.
Yukos dropped out of the bidding for the Greek state's 23 % stake in Hellenic Petroleum, leaving LUKoil to make a joint bid with the Latsis group of Greece. Leonid Fedoun, LUKoil's vice-president said he was "very happy" at Yukos' move, and said a stake in Hellenic would give LUKoil "a strategic presence" in the Balkan market "which has huge growth potential after the end of the Yugoslav war".

But the companies could go head-to-head elsewhere, suggested Mikhail Khodorkovsky, the head of Yukos, who said he was interested in acquisitions in Poland and Germany, stretching down to Italy, Turkey and Bulgaria. Mr Khodorkovsky said he would begin by purchasing stakes in refineries, because they were profitable and offered the prospect of long-term contracts. His strategy was to sell 70 % or more oil on contracts of at least five years.
He said he was puzzled why several refineries in the region had suddenly come on to the market, and speculated that one reason was pressure by financial analysts on oil companies to sell because refineries' return on capital was relatively low. He made clear he intended to exploit the situation.

LUKoil already has refineries in Ukraine, Romania and Bulgaria. But Mr Fedoun said LUKoil was negotiating both for a partnership with UK-based Rotch Energy, which has a preliminary agreement to buy the Gdansk refinery in Poland and is believed to be also talking to Yukos, and for some form of co-operation with Lithuania's Mazheikiu Nafta, operated by Williams of the US.
Mr Fedoun said tough US environmental rules had deterred LUKoil from buying a refinery in the US to supply the Getty chain of petrol stations it acquired a couple of years ago. Instead, it would use Getty's tank farms to store its Russian crude, which it would get a third party to refine.

Source: The Financial Times
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